Proposal 3: The '25 x 25' Renewable Energy Standard

Election Update: In the Nov. 6, 2012 election, Proposal 3 was voted down, meaning that the "25 x 25" constitutional amendment was not approved. The primary impact of this amendment would have been mandating new energy standards, which would have increased rates, decreased jobs and not assuredly have lowered harmful emissions.

Mackinac Center analysis indicates this proposal would do the following.

Proposal 3 would increase electricity rates. A Mackinac Center and Beacon Hill Institute study shows that the mandate will make rates 16.2 percent higher in 2025 than they would have been otherwise.

Proposal 3 would decrease jobs. The study also estimates that the increased electricity prices in the mandate will eliminate 10,540 jobs.

Proposal 3 would lower investment in Michigan, but it is unlikely to reduce national emissions. It is more likely to shift electricity generation and emissions to other states.

The cost cap on electricity contained in Proposal 3 is unlikely to be effective. It may fail to cover all of the costs of the mandate, and it doesn’t account for taxpayer subsidies to renewable energy.

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Frequently Asked Questions

Some claim Proposal 3 will create 94,000 Michigan jobs. Is that true?

No. There have been studies promoted by supporters of the proposal suggesting that the proposal’s mandated investment in renewable energy sources will increase the number of jobs in the state. This analysis ignores the costs of the mandate; a new study from the Mackinac Center and The Beacon Hill Institute, however, uses a computable general equilibrium model that considers both the investment and the costs. The study shows that the renewable energy standard will cost the state 10,514 jobs when fully implemented in 2025.

Should we be concerned about spending $1.7 billion annually on out-of-state coal?

Michigan trades both nationally and internationally. This trade helps residents stretch their dollars further. In this case, purchasing coal helps keep the costs of energy low for Michigan residents and businesses, allowing them to keep more of their money for other things.

Besides, the people of Michigan probably do not need to worry that West Virginia will exert undue influence over Michigan policy by withholding coal.

Would Proposal 3 help the state’s economy by helping build a clean energy industry in Michigan?

The state and federal government have already been pushing alternative energy with billions of taxpayer dollars. But this government support is not a sustainable economic advantage. There’s always another state or national government that can up the ante and subsidize competing businesses. Your own taxpayers suffer the consequences.

Add into this the risk of cronyism among clean energy subsidy-seekers and politicians, making it less likely that policies supporting this industry would result in economic growth.

Would the proposal actually cost Michigan jobs?

As these utility companies are forced to invest in less cost-efficient power generation facilities, rates will increase, resulting in a projected 10,540 fewer jobs in 2025 than there would have been without a clean energy mandate.

How much will this cost utility customers?

We expect that this mandate will increase rates by $180 for residential ratepayers, $1,630 for commercial ratepayers, and $53,580 for industrial ratepayers when it is fully implemented. This is approximately a 16 percent rate hike.

No. The Mackinac Center-Beacon Hill study estimates that Proposal 3 would make electricity prices 16.2 percent higher in 2025 than they would have been if there had been no renewable energy mandate (including the one passed by the Michigan Legislature in 2008). Even if the cap were completely effective, it would lower the projected rate increase from 16.2 percent to 13.8 percent. And the cap may not prove effective. It may fail to cover all of the costs of the mandate, and it doesn't account for taxpayer subsidies to renewable energy.